NZ fibre-to-the-premises network faces funding crisis

Regulator's copper cost chop stands.

New Zealand's national fibre-to-the-premises project is hanging in the balance after the government's supporting parties said they would not back legislation to override a decision made by the independent telco regulator.

ASX and NZX-traded Chorus owns and operates the country's existing copper phone line network after being structurally separated from Telecom NZ.

The company has been contracted by the government to build around 75 percent of the country's Ultra-Fast Broadband project.

However, it says that a recent decision by the regulator to cut what it can charge for copper-based services by 23 percent jeopardises funding for the UFB project, which aims to bring fibre-to-the-premises to New Zealanders.

Chorus said the drop in revenue will prevent it from borrowing the NZ$3 billion it needs to complete the UFB project.

The cut was made possible by amendments to telecommunications legislation in 2008, which switched the model used to calculate pricing.

Communications and information technology minister Amy Adams said the decision by the smaller parties not to back a legislative override mechanism was "expected".

“While we have not sought support for legislation from our support parties, they have indicated to me that legislation was always going to be a challenge, so today’s announcement comes as no surprise,” Adams said.

Both Adams and prime minister John Key had earlier indicated that the government would step in and overrule the telco regulator.

However, Adams is now backpedalling on the intervention, saying that the government's first priority is for Chorus to meet the shortfall itself.

She added that if that is not possible, the government would look at non-legislative options "as a first choice," but did not specify what form such intervention would take.

Ernst and Young Australia has been commissioned by the NZ government to provide an independent report into Chorus' financial position and its capability to deliver on the UFB contract and Adams said any decision taken would be based that.

Adams also said that the government's primary concern is to ensure New Zealanders get access to ultra-fast broadband, as that is in the long-term interests of the country.

Chorus has separately applied for a final pricing principle review of the regulator's decision. A spokesperson did not return calls seeking comment.

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